This is my amateur review of Netflix's Q2 2024 financial performance, its competitive advantages, and a comparison of its intrinsic value with analyst forecasts.
Latest Financial Results
Netflix reported robust financial results for Q2 2024:
- Revenue: $9.56 billion, a 17% year-over-year increase.
- Operating Margin: Improved to 27.2%, up from 22.3% in Q2 2023.
- Net Income: $2.15 billion, translating to a diluted EPS of $4.88, a 48% increase from Q2 2023.
- Subscriber Growth: Added 8.05 million net paid customers, bringing the global base to 277.65 million.
These results indicate strong operational performance and continued growth in subscriber base, driven by strategic initiatives such as the crackdown on password sharing and the introduction of ad-supported subscription plans.
Investment Moat
Netflix's competitive advantages, or "moat," are primarily based on:
1. Intangible Assets: Netflix's brand and vast content library create significant value. The company invests heavily in original content, which differentiates it from competitors.
2. Network Effect: As the leading streaming service, Netflix benefits from a large and growing subscriber base, which attracts more content creators and advertisers, further enhancing its value proposition.
3. First-Mover Advantage: Netflix pioneered the streaming industry, giving it a significant head start in accumulating subscribers and optimizing its service.
Current Market Price
As of time of this post, Netflix's stock price is about $698. This reflects a recent surge following the announcement of its strong Q2 2024 results.
Intrinsic Value vs. Analyst Forecast
Analysts have varied forecasts for Netflix's stock price:
- Intrinsic Value: Estimates suggest a best-case intrinsic value of around $600.
- Analyst Forecasts: The average 1-year price target is $704.74, with a low forecast of $550.45 and a high forecast of $840.
Given these estimates, the current market price is close to the average analyst forecast but below best-case intrinsic value.
Conclusion
Based on the latest financial results, Netflix demonstrates strong growth and profitability, supported by a solid competitive moat. However, the current market price of $698 is above the intrinsic value, suggesting limited upside potential without a margin of safety. Therefore, I would consider investing in Netflix if the stock price falls to approximately $600.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
